Template-Type: ReDIF-Paper 1.0
Title: The Status Quo and Belief Polarization of Inattentive Agents: Theory and Experiment
Author-Name: Vladimir Novak
Author-Email: vladimir.novak@nbs.sk
Author-Name: Andrei Matveenko
Author-Email: matveenko@uni-mannheim.de
Author-Name: Silvio Ravaioli
Author-Email: vio.ravaioli@cornerstone.de
Classification-JEL: C92, D72, D83, D84, D91
Keywords: Polarization, Beliefs Updating, Rational Inattention, Status Quo, Experiment

Abstract: We show that rational but inattentive agents can become polarized ex-ante. We present
how optimal information acquisition, and subsequent belief formation, depend crucially
on the agent-specific status quo valuation. Beliefs can systematically - in expectations
over all possible signal realizations conditional on the state of the world - update away
from the realized truth and even agents with the same initial beliefs might become
polarized. We design a laboratory experiment to test the model’s predictions. The
results confirm our predictions about the mechanism (rational information acquisition),
its effect on beliefs (systematic polarization) and provide general insights into demand
for information.

Note: 
Length: 72
Creation-Date: 2023-01
Revision-Date: 
File-URL: https://www.crctr224.de/research/discussion-papers/archive/dp385
File-Format: application/pdf
Handle: RePEc:bon:boncrc:CRCTR224_2023_385